The transaction comprises a full capital structure from triple-A to triple-B, backed by a portfolio of good-quality prime residential mortgages. But it is being used in its entirety as repo collateral to back the £3 billion ($6 billion) emergency funding that the lender has been forced to agree with the Bank of England. The downgrade of Northern Rock by the rating agencies means that the swap agreements in place to hedge basis risk in the master trust are now in breach and while the master trust pool size has increased, portfolio yield has fallen sharply. The new deal has a call option from November 2007.
